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U.S. stocks skidded to their fourth loss in five weeks, as concerns about a splintering Europe and the slackening U.S. recovery prompted investors to flee risky assets.

The selling accelerated Friday after investors were reminded that neither the Atlantic nor our benevolent Federal Reserve can shield us from Europe's noisy drama. As Europe's recession deepened, U.S. employers slowed the pace of hiring and added just 69,000 jobs in May, the least in a year, and the unemployment rate ticked up to 8.2% (for more on this, see Economic Beat, "Jobs Data's Chilling Message"). By the closing bell, the Dow industrials had fallen into the red for the year, and crude oil and copper were plumbing fresh 2012 lows.

The alarm was even shriller in the bond market, where the lunge for safety drove the yield on 10-year Treasuries below 1.5%, a record. In Germany, yields on two-year bunds fell to zero, while its 30-year yield actually dipped below that of Japan. Just think: Investors are now willing to lend money for years to Washington or Berlin at no, or next to no, interest, even if factoring in inflation means that they'll take a loss.

Attention now turns to Greece's June 17 elections. Success by a pro-bailout coalition, with enough votes to stave off a default, could trigger a momentary relief rally. But any deviation from this script could fan the market's worst fears.

You'd think fresh bleeding from the tired, familiar scab that is Europe can't possibly shock or hurt much, but think again. Investors have been paring risk and are crouched in neutral, but most aren't bracing for a big setback. BofA Merrill Lynch's mid-May survey showed fewer global money managers expecting strong growth, and less than 10% saying that they're taking on above-average portfolio risk. Yet a recession isn't in their forecasts.

If Greece leaves the euro zone—which some on Wall Street deem unlikely but hardly impossible—banks could come under more pressure. Already, strategists estimate that a third of deposits have left Greek banks over three years. Unless the chain of events is arrested, banks in southern Europe might have to sell their government bonds to meet the outflow of deposits, pushing yields there even higher, notes Jeffrey Kleintop, chief market strategist at LPL Financial.

Last week, Credit Suisse nudged the odds of a Greek exit to 20% from 15%, but says there's just a 10% chance of a complete euro-zone breakup. JPMorgan pegged the odds of a Greek exit at 50%, but it thinks there's a less than 10% chance that this will lead to contagion in Spain and Italy.

Meanwhile, the brittle global recovery has increased calls everywhere for central banks to ride to the rescue. The scramble to shore up liquid assets lifted the buck to a two-year high against the euro, with the dollar index even higher today than in the summer of 2008, before our central bank embarked on its record bout of money printing. With markets shuddering in sync and the outcome in Europe hard to handicap, money managers would rather withdraw and wait. The result is a state of stasis, akin to paralysis.

The Dow Jones Industrial Average ended last week at 12119, a 2012 low, after losing 336 points, or 2.7%. The Standard & Poor's 500 fell 40 points, or 3%, to 1278. It has slumped 8.9% over the past five weeks and is up just 1.6% this year. The Nasdaq Composite lost 90 points, or 3.2%, and ended Friday at 2747, while the Russell 2000 fell 29 points, or 3.8%, to 737.

For all of May, losses totaled 6.2% for the Dow, 6.3% for the S&P 500, 7.2% for the Nasdaq, and 6.7% for the Russell.

GOLD'S REPUTATION AS A STORE of value has been burnished to a blinding gleam in this age of competitively depreciating paper currencies. So why is gold lately behaving more like a risky asset than a safe harbor?

Over the past year, gold prices have tended to spike or skid in lockstep with stocks and commodities—much more than with Treasuries. Stocks may have pulled back 10% since April 2, but that money hasn't gone toward gold, which is down 9% over the past three months.

Gold is still a compelling hedge against inflation in the long run. But since 2009, when central banks began printing reams of money to support their flailing economies, "investor enthusiasm has pushed the metal past fair value and into speculative territory," says Jack Ablin, Harris Private Bank's chief investment officer. "For that reason, gold appears to more closely resemble a risk asset, rather than a safe haven nowadays."

That guest-starring stint in the risky-asset soap opera won't end until the precious metal gets less out-of-whack with inflation expectations. Gold has far outgunned other commodities since 2008, and the ratio of gold prices relative to the CRB all-spot commodity index has leapt far ahead of year-over-year inflation. In the shorter term, the metal might have to trail other commodities to bring prices more in line with inflation, Ablin says.

Gold had also benefited from the surge in liquidity and emerging-market wealth, with demand especially rabid in India and China, so waning agricultural prices can thwart Asian hoarders.

Gold prices have repeatedly tested a key support level near $1,520 a troy ounce, notes Michael Shaoul, CEO of New York brokerage firm Oscar Gruss, and "our experience is that levels that are revisited time and again eventually give way."

The home-goods chain has defied expectations to rally 22% this year. Bed Bath had benefited from the downfall of rival Linens 'n Things, but investors have begun fretting about slowing growth, tougher comparisons and encroaching competition from Internet retailers.

When Bed Bath recently agreed to buy
Cost Plus
(CPWM) for $550 million, detractors took the acquisition—its largest to date—as a tacit admission that management had run out of ideas for growing the business.

Yet Cost Plus may prove to be money well spent, because Bed Bath has no debt and a cash pile equal to 11% of its stock-market value.

Cost Plus became profitable over the past two years after a string of annual losses, and the underappreciated discounter earns 60% of its sales from home furnishings, many of them private-label, and another 40% from consumables.

Analysts expect it to expand Bed Bath's food offering and merchandise sourcing. Its 260 stores are often smaller than Bed Bath's superstores, but their choice real estate could come in handy for expanding other Bed Bath businesses like Buy Buy Baby.

At about 71, Bed Bath shares fetch just 15 times projected profits—compared with their median of 17.5 times over the past decade. Credit Suisse recently nudged up its projected 2013 profits to $5.37 from $5.15 and applied a 17 times multiple to the stock to arrive at a price target of 91.

Bed Bath & Beyond, of course, isn't the only consumer stock to shine. Investors have been dumping energy and industrial issues hitched to global growth, but many still hope that our housing and jobs markets will continue to mend, and that Fed-coddled Americans will keep shopping, even as Europe burns.

As a result, consumer discretionary is the year's top sector, joining staples as the only groups to far surpass their prior bull-market peaks.